British multi-asset electronic trading firm IG Group has today announced its preliminary results for the year ending May 31, 2014, which depict a steady upward direction, despite the period of high volume results which brought vast revenues to many FX companies around the world having concluded almost a year ago.
IG Group Chairman Jonathan Davie stated today that he is “pleased to report another record year for the Group. Revenue increased by 2.4% to £370.4 million (2013: £361.9 million), whilst diluted earnings per share increased by 3.6% to 40.18 pence (2013: 38.80 pence).”
Mr. Davie continued that “We continue to build on our long history of growth, with profitability having increased every year since our public listing in 2005. As part of our aim to become the default choice for active traders, we are now progressing new initiatives which should have positive long-term benefits for shareholders. These include our stockbroking product, our forthcoming entry into Switzerland, our application to the regulator in Dubai for a retail-trading license and our continued technology developments, with particular emphasis on mobile applications and our online presence.”
Whilst the firm did make an increase in revenue compared to last year, the difference is relatively negligible, congruent with LeapRate’s announcement recently that IG Group’s volumes were generally weak during the past quarter of the year, due mainly to low volatility in the FX markets. As such, LeapRate stated that at the time of announcing its brief financial update in May this year, the company had expected that its full year revenues would be below expectations. The slowness of the company’s performance during the first few months of this year should also be taken into account, a dynamic which has plagued many firms during this period.
Despite that, IG Group expected that earnings and cash flow would remain on track, as operating costs continue to run slightly below plan, a factor that has indeed been reflected in today’s interim results.
Operating and Financial Summary
- Good full year results despite a subdued backdrop at the end of the year.
- Net trading revenue(1) up 2.4% at £370.4 million.
- Profit before tax up 1.3% to £194.7 million.
- Diluted EPS up 3.6% at 40.18p.
- £160.6 million of own funds generated from operations.
- Final dividend recommended of 22.40p per share; full year dividend up 21.1% to 28.15p.
- Ordinary dividend payout ratio increased to approximately 70% of earnings.
- Strong progress on longer-term strategic growth initiatives.
- Swiss licence application in the final stages and applying to expand into Dubai.
As far as regional distribution is concerned, the firm experienced modest growth from the UK and Ireland, up 3%, and a fall in revenue from Australia, down 7%. Both economic conditions and consumer sentiment are noticeably weaker in Australia, which has lagged the rest of the world with its economic downturn.
IG Group states that it delivered strong growth in Europe, up 16% overall. All four large European offices grew, with the strongest growth rates of 20% and 15% coming from the company’s two largest offices, Germany and France respectively.
The company’s European businesses are still at a relatively early stage in their development, and most of the growth to date has been against the headwind of recession, so the company remains confident that these units can continue to deliver strong growth for some years to come. This year, 22% of our revenue came from Europe, and this proportion is growing, making Europe an increasing contributor to overall growth rate.
In the Rest of World business segment, revenue was down by 10%, as the impact of the exceptionally low volatility in FX was felt most in Singapore and Japan, where forex makes up the majority of client trading activity. Within this segment, the company’s US binary options exchange, NADEX, delivered 55% revenue growth but, at £3.1 million of revenue, it remains small. Shortly before the year-end two additional market makers joined the exchange, one of which has been consistently providing additional liquidity for the last couple of months. This greater liquidity, along with narrower effective spreads, should make NADEX a more attractive venue for trading.
Mr. Davie concluded “I am delighted to report another record year for the Group. We continue to build on a long history of growth, with profitability having increased every year since our public listing in 2005.”
“As part of our aim to become the default choice for active traders, we are now progressing new initiatives, which should have positive long-term benefits for shareholders” he said.
Tim Howkins, Chief Executive, commented: “This was a good year for IG, with growth in revenue, profit, cash generation and dividends. Importantly, we also made strong progress on our strategic objectives, designed to deliver the next phase of our growth. We will continue to make significant investments in initiatives, this year and beyond, to deliver sustainable growth into the future.”
For the full statement, click here.